CENVAT credit on job work inputs allowed where goods were ultimately used in dutiable final products

CENVAT credit on inputs used in job work was held admissible where the goods were cleared to the principal manufacturer without duty and were later used in the manufacture of dutiable final products. The Tribunal applied the larger Bench ruling in Sterlite Industries and held that the bar under the rule governing exempt clearances did not apply on materially similar facts. The denial of credit was therefore unsustainable, the disallowance order was set aside, and the assessee's appeal succeeded.

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Issues: Whether CENVAT credit on inputs used in job work, where the goods are cleared without payment of duty to the principal manufacturer and the final product is later cleared on payment of duty, is admissible.

Analysis: The dispute related to denial of credit on inputs used for job work. The lower authorities had relied on Rule 6(1) of the CENVAT Credit Rules, 2004 to deny the credit. The Tribunal held that the issue was covered by the larger Bench ruling in Sterlite Industries, where credit on inputs used in the manufacture of goods cleared without payment of duty for further use in the manufacture of dutiable final products was held not to be hit by the equivalent prohibition under Rule 57C of the Central Excise Rules, 1944. On the materially similar facts before it, that ratio was held to apply squarely.

Conclusion: The denial of CENVAT credit was unsustainable and the credit was held admissible in favour of the assessee.

Final Conclusion: The order disallowing CENVAT credit was set aside and the appeal succeeded.

Ratio Decidendi: Credit on inputs used in job work is admissible where the goods are ultimately used in the manufacture of dutiable final products by the principal manufacturer and the statutory bar applicable to exempt clearances does not apply on those facts.

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